ING Group signed an agreement with Bank of Beijing on Friday in Beijing to purchase a 19.9 per cent stake in the bank, making a substantial move to expand its commercial banking business in China.
The International Finance Corporation (IFC) is also seeking approval from its board to take a 5 per cent stake in the Beijing-based lender, while the previously reported investment intention of Deutsche Bank is obviously over.
According to agreements signed on Friday, ING will spend 1.78 billion yuan (US$215 million) to acquire the stake in Bank of Beijing.
That, in addition to the proposed 5 per cent stake purchase by IFC, will take the total foreign shareholding to 24.9 per cent, which temporarily excludes the possibility of other foreign investment in the bank.
China sets an upper limit of 20 per cent for the stake a single foreign investor can hold in a domestic bank and 25 per cent for all foreign shareholdings in the bank.
"China's banking industry is close to a full opening up," said Yan Xiaoyan, president of Bank of Beijing, at the signing ceremony on Friday in Beijing. "As a Chinese bank, our target is to explore the international market and become an internationally competitive bank."
Yan said that apart from foreign capital, the bank will also introduce advanced technology and expertise from its foreign partners to upgrade its management and operating system.
Alexander Rinnooy Kan, chairman of Asia-Pacific and Member of the Executive Board for ING Group, said the investment is a major milestone in ING's business expansion in the commercial banking sector in China.
It will provide its own financial expertise, especially that of corporate governance and risk management to the Chinese partner, which will also offer it a new platform to serve Chinese clients.
ING believes in the development potential of Bank of Beijing and hopes to help it become a "world-class bank," he said.
Bank of Beijing was originally named Beijing City Commercial Bank, founded in 1996. It is one of the 100 or so city-level commercial banks in China.
But the bank was renamed in January, when it first revealed the plan to introduce foreign strategic investment and seek a public listing to support business expansion. Deutsche Bank was also one of the reported potential investors in the bank at the time, but it finally withdrew from the negotiation.
Bank of Beijing now has 117 branches across China. Its total assets reached 209 billion yuan (US$25.2 billion) by the end of 2004, nearly 10 times its size nine years ago.
After the foreign capital injection, the bank's total shareholders' equity will reach 10.1 billion yuan (US$1.2 billion).
"China's banks are facing many challenges," said Karin Finkelston, IFC's associate director, on Friday at the signing ceremony.
But some of them will become competitive in the international markets, she added. Meantime they will also offer China's private businesses more financial support.
IFC has been an active investor in China's small and medium-sized banks, with investments in Bank of Shanghai, Nanjing City Commercial Bank, Xi'an City Commercial Bank, Industrial Bank and China Minsheng Banking Corp Ltd.
(China Daily March 27, 2005)
